Xstrata Profit Plunges On Charges, Lower Prices, Hikes Dividend

3/5/2013 5:21 AM ET

Anglo-Swiss miner Xstrata Plc (XTA.L,XSRAY.PK,XSRAF.PK), which is in deal to be merged with Swiss commodities trader Glencore International plc (GLEN.L,GLNCY.PK,GLCNF.PK), reported Tuesday a sharp decline in fiscal 2012 profit reflecting hefty impairment charges, lower commodity prices and copper volumes as well as ongoing cost inflation. The company also hiked its dividend, and said it sees a gradual global recovery in 2013.

Xstrata and Glencore have also extended the longstop date for their proposed merger to April 16. The completion of the merger remains conditional upon regulatory approval in China and completion of the Xstrata court process.

In the year 2012, Xstrata's pre-tax profit plunged to $2.0 billion from prior year's $8.15 billion. The latest annual results were hurt by $2.6 billion of exceptional items, predominantly due to the impairment of assets.

Adjusted pre-tax profit, which excluded exceptional items, totaled $4.58 billion this year, down from $8.15 billion a year ago.

Attributable profit for the year plummeted 79 percent to $1.18 billion or $0.40 per share, while adjusted attributable profit dropped 37 percent to $3.65 billion or $1.24 per share.

Annual revenues also fell 7 percent to $31.62 billion in 2012 from $33.88 billion in 2011.

In the year, total mined copper production fell 16 percent reflecting planned lower volumes due to the division's transition to new mines and expansions, together with production issues at Collahuasi. Meanwhile, total consolidated coal production grew 7 percent.

Realised Australian export thermal and coking coal prices fell 7 percent and 25 percent, respectively, and the average LME nickel price dropped 23 percent. After a strong start to 2012 for all commodities, the renewed turmoil in the eurozone, the Chinese economic slowdown and the dynamics of the US domestic coal market together negatively impacted commodity prices, the company said.

In the year, the emerging markets, such as China and India, were impacted by the fall in exports to the US and Europe as sovereign debt concerns in the Eurozone continued, while a second round of quantitative easing in the US failed to deliver meaningful growth.

Further, the company said its Directors have recommended the payment of a final dividend of 31.5 cents per share, bringing the dividend for 2012 to a total of 45.5 cents, a growth of 14 percent from last year.

Looking ahead, Xstrata Chief Executive Officer ML Davis said, "First evident in late 2012 and continuing into the early part of 2013, a gradual global recovery appears underway, particularly in China and the US. 2013 promises to deliver a further transformational expansion of our production capacity as our growth program nears completion. We plan to commission a number of new projects in 2013..."

In London, Xstrata shares are currently trading at 1,130.50 pence, up 31 pence or 2.82 percent.